Downing Street said “all contingencies” will be discussed by cabinet members in the regular Number 10 session.
That will include what happens if there is no deal, alongside the PM’s hopes for progress on a trade agreement.
It comes amid mounting pressure from her own party to prepare for the prospect of failing to reach an acceptable agreement with Brussels.
Britain is currently seeking to intesify talks with the European Union in a bid to break the deadlock.
Davis has proposed a change to the structure in the negotiations in the hope that it will help both sides make the needed compromises.
Theresa May's cabinet is preparing for no deal
Brexit Secretary David Davis, who has spent months negotiating with Brussels as progress stalled, is expected to lead the discussions with the Cabinet this morning.
He is calling for more discussions on an ongoing basis and a move away from the current pattern of four-day sessions held once a month in Brussels.
A source close to the negotiations told Bloomberg: "Regardless of the negotiating structure, only compromises on both sides will deliver the progress needed to break the logjam."
A spokesman for Mrs May said: “It is looking at Brexit preparations for all contingencies.
“That obviously does include 'no deal', but as the Prime Minister has said on many occasions, we are working towards getting a deal and we are confident that we will do so.
"Cabinet has been updated on Brexit preparations regularly. This is another opportunity to do so.”
Brexit Secretary David Davis
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Asked whether ministers would discuss the possibility of Brexit not happening, he said: "We have been very clear that we are leaving the European Union."
Although Mrs May hopes there will be a breakthrough in negotiations to allow trade talks to begin after December's meeting of European leaders, no further talks between Mr Davis and Mr Barnier have been scheduled yet.
However the UK must first satisfy the EU that the UK will pay what it owes when it leaves.
It emerged yesterday that ex-Lib Dem leader Nick Clegg, Labour peer Lord Adonis and veteran pro-EU Tory Ken Clarke were in Brussels for talks with Mr Barnier and EU economic and financial affairs commissioner Pierre Moscovici.
European Commission spokesman Alexander Winterstein insisted that the only negotiations taking place were those involving the teams led by Mr Davis and Mr Barnier.
He said: "His door is always open for people who want to speak to him and his team, across the political spectrum and from all walks of life, from all parties, whoever is interested to speak to Michel Barnier."
The news led to criticism the EU is engaged in a "shadow negotiation” with pro-Remainers.
But Mr Winterstein said: "There are two negotiators – on the one side the Secretary of State for Exiting the EU, David Davis, and on the European side it's the chief negotiator of the EU, Michel Barnier. Nobody else."